HERITAGE INSURANCE HOLDINGS, INC. – 10-Q – Management's Discussion and Analysis of Financial Condition and Results of Operations
You should read the following discussion in conjunction with our condensed
consolidated financial statements and related notes and other information
included elsewhere in this Quarterly Report on Form 10-Q and in our Annual
Report on Form 10-K for the year ended
Unless the context requires otherwise, as used in this Form 10-Q, the terms
"we", "us", "our", "the Company", "our Company", and similar references refer to
Overview
We are a super-regional property and casualty insurance holding company that
primarily provides personal and commercial residential insurance products across
our multi-state footprint. We provide personal residential insurance in
on both an admitted and non-admitted basis and in
basis. As a vertically integrated insurer, we control or manage substantially
all aspects of risk management, underwriting, claims processing and adjusting,
actuarial rate making and reserving, customer service, and distribution. Our
financial strength ratings are important to us in establishing our competitive
position and can impact our ability to write policies.
Recent Developments
Economic and Market Factors
We continue to monitor the effects of general changes in economic and market
conditions on our business. As a result of general inflationary pressures, we
have experienced, and may continue to experience, increased cost of materials
and labor needed for repairs and to otherwise remediate claims throughout all
states in which we conduct business. Additionally, we anticipate continued
rising costs and constrained availability of catastrophe reinsurance. We
mitigate these conditions by continued exposure management, implementation of
increased rates and the use of inflation guard, which increases the insured
value of a property to reflect the inflationary impact on costs to repair
properties.
The table below provides policy count, premiums-in-force, and TIV for
and all other states as of
first quarter of 2022. One of our goals has been to reduce personal lines
exposure in
policies-in-force declined from the prior year quarter by 15.6% with a 13.2%
increase in premiums-in-force, and a TIV increase of only 1.8%. The increase in
commercial residential business, and use of inflation guard, partly offset by
premium reductions associated with fewer policies. Use of inflation guard,
partly offset by fewer personal residential policies, also increased TIV from
the prior year quarter. Compared to the first quarter of 2022, premiums-in-force
for markets outside of
rate actions and exposure management.
The Supplemental Information table demonstrates progress made compared to the first quarter 2022. Policies-in-force: Q1 2023 Q1 2022 % Change Florida 172,425 204,406 (15.6 ) % Other States 336,647 355,090 (5.2 ) % Total 509,072 559,496 (9.0 ) % Premiums-in-force: Florida$ 624,931,522 $ 551,962,357 13.2 % Other States 681,407,015 626,010,221 8.8 % Total$ 1,306,338,537 $ 1,177,972,578 10.9 % Total Insured Value:
Florida$ 104,735,498,939 $ 102,863,325,053 1.8 % Other States 302,701,975,889 293,478,796,893 3.1 % Total$ 407,437,474,828 $ 396,342,121,946 2.8 %
Strategic Profitability Initiatives
The following provides an update to our strategic initiatives that are expected
to enable us to achieve consistent long-term quarterly earnings and drive
shareholder value.
•
Generate underwriting profit through rate adequacy and more selective
underwriting.
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o
Continued significant rating actions throughout the book of business resulting
in an increase in average premium per policy throughout the book of 5.9% from
fourth quarter 2022, and 21.9% over first quarter 2022.
o
Premiums-in-force of
while policy count is down 9.0%, resulting from prior underwriting efforts.
o
Continued focus on tightening underwriting criteria while also restricting new
business for policies written in over-concentrated markets or products.
•
Allocate capital to products and geographies that maximize long-term returns.
o
Increased commercial residential premiums-in-force by 69.6% over the prior year
quarter while total insured value ("TIV") only increased 39.9% and policies in
force increased by only 11.8%.
o
Reduction of policy count for the
focus and will continue until the positive impact of recent legislation to
reduce abusive claims practices is realized. Policy count for
lines business intentionally declined by 16.8% as compared to the prior year
period.
o
Disciplined underwriting approach resulted in a policy count reduction of 5.2%
in other states while generating an 8.8% increase in premiums-in-force.
•
Maintain a balanced and diversified portfolio.
o
Even with the substantial increase in commercial business, no state represents
over 26% of the Company's TIV.
o
The top four states grew TIV by an average of 3.7% while the smallest five
states grew by 38.8%.
o
As a result of diversification efforts, the top five personal lines states
represented 71.5% of all TIV at first quarter 2023 compared to 73.3% of all TIV
at first quarter 2022.
o
Florida TIV increased 1.8% related to the use of inflation guard and growth of
the Company's commercial residential product.
o
TIV in other states increased 3.1% compared to the prior year period, largely
driven by inflation guard.
o
Excluding
74.0% as of the first quarter of 2022.
•
Provide coverage suitable to the market and return targets.
o
Expansion of Excess & Surplus lines ("E&S") premium-in-force in
o
Continued plan to introduce E&S products in
of 2023.
o
Continue to evaluate other strategic states for E&S products.
Reinsurance Commutation
As further described in Note 17, Commitments and Contingencies, to the condensed
consolidated financial statements, our 2017 reinsurance agreement with the FHCF
requires a commutation no later than 60 months after the end of the contract
year, which commutation process is expected to begin in
this process, Heritage and FHCF will terminate the 2017 reinsurance agreement
and agree on the amount that FHCF will be required to pay to the Company to
settle all outstanding losses owed under the agreement related to losses from
Hurricane Irma. As such, this commutation process will ultimately result in a
final determination of and payment for known, unknown or unreported claims
relating to Hurricane Irma, with the potential for payment by the FHCF to
Heritage of a larger or lesser amount than would otherwise have been the FHCF's
responsibility if the commutation were not required by
contract terms. The commutation process has not yet begun, and the Company
cannot predict whether the loss estimates determined by Heritage and the loss
estimates determined by the FHCF will differ. As such, there is no assurance
that the reported reinsurance recoverable for Hurricane Irma losses from the
FHCF will differ from the final amount that will be paid by the FHCF. Further,
social inflation and the litigated claims environment in the
which affected Hurricane Irma claims could result in adverse development of
these claims which, create uncertainty as to the ultimate cost to settle of all
the remaining Hurricane Irma claims. Accordingly, the final amount that will be
paid by the FHCF could vary from the Company's current or future estimation of
losses to be recovered from the FHCF. The commutation process will be final and
binding on both parties once complete.
Overview of 2023 Financial Results
In the following section, we discuss our financial condition and results of
operations for the three months ended
months ended
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The discussion of our financial condition and results of operations that follows
provides information that will assist the reader in understanding our
consolidated financial statements, the changes in certain key items in those
financial statements from year to year, including certain key performance
indicators such as net combined ratio, ceded premium ratio, net expense ratio
and net loss ratio, and the primary factors that accounted for those changes, as
well as how certain accounting principles, policies and estimates affect our
consolidated financial statements. This discussion should be read in conjunction
with our consolidated financial statements and the related notes included under
Item 1 of this Quarterly Report on Form 10-Q.
•
Net income for the three months ended
per diluted share, compared to a net loss of
diluted share in the prior year quarter.
•
Gross premiums written were
prior year quarter, reflecting higher average premium per policy throughout the
book of business, partly offset by intentional exposure management related
reductions in
10.0% and 1.0%, respectively, and a strategic and substantial increase in
•
Gross premiums earned of
prior year quarter, reflecting higher gross premiums written over the last
twelve months driven by a higher average premium per policy and organic growth
of our commercial residential business.
•
Net premiums earned of
year quarter, reflecting higher gross premium earned outpacing the increase in
ceded premiums for the quarter.
•
Losses and loss adjustment expenses ("LAE") incurred of
30.4% from
stems from significantly lower weather losses in the southeast. Net current
accident year weather losses were
million
million
down from
unfavorable prior year development in the prior year quarter.
•
Ceded premium ratio of 47.6%, up 0.8 points from 46.8% in the prior year quarter
driven by a higher cost of the 2022-2023 catastrophe excess of loss program,
stemming from both higher costs and higher TIV, partly offset by higher gross
premiums earned.
•
Net loss and LAE ratio of 58.7%, 32.9 points lower than the prior year quarter
of 91.6%, driven by lower losses incurred as described above.
•
Net expense ratio of 35.8%, down 2.1 points from the prior year quarter amount
of 37.9%, as slightly higher policy acquisition costs were more than offset by
the benefit of higher gross premiums earned over the prior year quarter.
•
Net combined ratio of 94.5%, down 35.0 points from 129.5% in the prior year
quarter, driven by lower net loss and net expense ratios as described above.
•
Effective tax rate was 18.6% compared to 25.7% in the prior year quarter, driven
by the impact of permanent differences in relation to the pre-tax income or loss
each quarter. In addition, the Company reduced its valuation allowance from
fourth quarter 2022 by
for the quarter. The valuation allowance relates to certain tax elections made
by Osprey Re, the Company's captive reinsurer domiciled in
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Results of Operations
Comparison of the Three Months Ended
Revenue For the Three Months Ended March 31, (Unaudited) 2023 2022 $ Change % Change (in thousands) REVENUE: Gross premiums written$ 310,309 $ 283,196 $ 27,113 9.6 % Change in gross unearned premiums 6,713 4,172 2,541 60.9 % Gross premiums earned 317,022 287,368 29,654 10.3 % Ceded premiums (150,993 ) (134,439 ) (16,554 ) 12.3 % Net premiums earned 166,029 152,929 13,100 8.6 % Net investment income 5,582 2,000 3,582 179.1 % Net realized gains 1,898 (16 ) 1,914 NM Other revenue 3,412 3,695 (283 ) (7.6 )% Total revenue$ 176,921 $ 158,608 $ 18,313 11.5 % NM= Not Meaningful Gross premiums written
Gross premiums written were
prior year quarter, reflecting higher average premium per policy throughout the
book of business, partly offset by intentional exposure management related
reductions in
10.0% and 1.0%, respectively, and a strategic increase in
lines business of 92.4%.
Premiums-in-force of
increase from first quarter 2022, primarily due to continued proactive
underwriting and rate actions, despite a policy count reduction of approximately
50,000 policies. In addition, our intentional growth of the Company's commercial
product, and use of inflation guard, favorably impacted premiums-in-force.
Concurrently, TIV increased only 2.8%.
Gross premiums earned
Gross premiums earned of
prior year quarter, reflecting higher gross premiums written over the last
twelve months driven by a higher average premium per policy and organic growth
in our commercial residential business.
Ceded premiums
Ceded premiums were
million
in the cost of our catastrophe excess of loss reinsurance program driven by an
increase in TIV and higher reinsurance costs for the respective reinsurance
contract periods as well as a higher cost for our net quota share reinsurance
associated with premium growth in the northeast.
Net premiums earned
Net premiums earned were
growth in gross premiums earned outpacing the increase in ceded premiums, as
described above.
Net investment income
Net investment income, inclusive of realized investment gains and unrealized
gains on equity securities, was
yields on cash and invested assets associated with higher interest rates,
coupled with a gain on the sale of other investments.
Other revenue
Other revenue was
the prior year quarter, driven primarily by a reduction of policy fee income as
the policy count declined.
Total revenue
Total revenue was
million
premiums earned and investment income as described above.
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For the Three Months Ended March 31, (Unaudited) 2023 2022 $ Change % Change OPERATING EXPENSES: (in thousands)
Losses and loss adjustment expenses 97,452 140,038 (42,586 ) (30.4 )%
Policy acquisition costs
40,324 38,257 2,067 5.4 %
General and administrative expenses 19,054 19,724 (670 ) (3.4 )%
Total operating expenses
156,830 198,019 (41,188 ) (20.8 )%
Losses and loss adjustment expenses
Losses and LAE were
million
net weather losses, as described above. Refer to Note 17, Commitments and
Contingencies, to the condensed consolidated financial statements for discussion
related to the upcoming commutation of our 2017 reinsurance contract with the
FHCF.
Policy acquisition costs
Policy acquisition costs were
to growth in gross premiums written and is partly offset by higher ceding
commission income.
General and administrative expenses
General and administrative expenses were$19.1 million in first quarter 2023, down 3.4% from the prior year quarter. The reduction was driven primarily by IT costs and certain costs which vary with policy count, such as printing and postage. For the Three Months Ended March 31, (Unaudited) 2023 2022 $ Change % Change (in thousands, except per share amounts) Operating income (loss) 20,091 (39,411 ) 59,502 (151.0 )% Interest expense, net 2,881 1,972 909 46.1 % Income (loss) before income taxes 17,210 (41,383 ) 58,593 (141.6 )%
Provision (benefit) for income taxes 3,202 (10,624 ) 13,826 (130.1 )%
Net income (loss)
$ 14,008 $ (30,759 ) $ 44,767 (145.5 )%
Basic earnings (loss) per share
Diluted earnings (loss) per share
Interest expense, net
Interest expense, net was
from the prior year quarter and driven by higher variable interest rates on our
debt.
Provision (Benefit) for income taxes
The provision for income taxes was
to a tax benefit of
rate was 18.6% compared to 25.7% in the prior year quarter, driven by the impact
of permanent differences in relation to the pre-tax income or loss each quarter.
In addition, the Company reduced its valuation allowance from fourth quarter
2022 by
quarter. The valuation allowance relates to certain tax elections made by Osprey
Re, the Company's captive reinsurer domiciled in
can fluctuate throughout the year as estimates used in the quarterly tax
provision are updated with additional information.
Net income (loss)
First quarter 2023 net income was
from net loss of
quarter. The quarter-over-quarter change primarily stems from higher
underwriting income driven by higher rates and investment income and
significantly lower weather losses, as described above.
Ratios For the Three Months Ended March 31, (Unaudited) 2023 2022 Ceded premium ratio 47.6 % 46.8 % Net loss and LAE ratio 58.7 % 91.6 % Net expense ratio 35.8 % 37.9 % Net combined ratio 94.5 % 129.5 % 26
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Ceded premium ratio
The ceded premium ratio was 47.6%, up 0.8 points from 46.8% in the prior year
quarter driven by a higher cost of the 2022-2023 catastrophe excess of loss
program and net quota share program, as described above, partly offset by higher
gross premiums earned.
Net loss and LAE ratio
The net loss and LAE ratio was 58.7% in first quarter 2023, down 32.9 points
from 91.6% in the prior year quarter, driven by significantly lower weather
losses compared to the prior year quarter, as described above, coupled with
higher net premiums earned.
Net expense ratio
The net expense ratio of 35.8%, down 2.1 points from the prior year quarter
amount of 37.9%, driven by higher policy acquisition costs from by the growth in
gross premiums written partly offset by lower general and administrative
expenses, and the benefit of higher gross premiums earned over the prior year
quarter.
Net combined ratio
The net combined ratio was 94.5% in first quarter 2023, down 35.0 points from
129.5% in the prior year quarter. The decrease primarily stems from lower net
loss and LAE and net expense ratios as described above.
Liquidity and Capital Resources
Our principal sources of liquidity include cash flows generated from operations,
existing cash and cash equivalents, our marketable securities balances and
borrowings available under our Credit Facilities. As of
compared to
2022
investment of proceeds from investment maturities into short term treasury bills
to achieve a higher yield without increasing credit risk, and to increase
liquidity.
We generally hold substantial cash balances to meet seasonal liquidity needs
including amounts to pay quarterly reinsurance installments as well as meet the
collateral requirements of Osprey Re, our captive reinsurance company, which is
required to maintain a collateral trust account equal to the risk that it
assumes from our insurance company affiliates.
We believe that our sources of liquidity are adequate to meet our cash
requirements for at least the next twelve months.
We may increase capital expenditures consistent with our investment plans and
anticipated business strategies. Cash and cash equivalents may not be sufficient
to fund such expenditures. As such, in addition to the use of our existing
Credit Facilities, we may need to utilize additional debt to secure funds for
such purposes.
Cash Flows For the Three Months Ended March 31, 2023 2022 Change (in thousands) Net cash provided by (used in): Operating activities$ 14,946 $ (39,206 ) $ 54,152 Investing activities 36,525 (27,648 ) 64,173 Financing activities (2,379 ) (4,312 ) 1,933 Net increase (decrease) in cash and cash equivalents$ 49,092 $ (71,166 ) $ 120,258 Operating Activities
Net cash provided by operating activities was
ended
million
activities relates primarily to timing of cash flows associated with claim and
reinsurance payments as well as reinsurance reimbursements during the first
three months of 2023 compared to the first three months of 2022.
Investing Activities
Net cash provided by investing activities for the three months ended
2023
investing activities relates primarily to the timing of investment maturities
and related re-investment of proceeds into short-term treasury bills.
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Financing Activities
Net cash used in financing activities for the three months ended
was
million
financing activities relates primarily to the repurchase of
treasury stock and a
(defined below) to purchase and retire
(defined below) during the first quarter of 2022, as described in Note 14 to the
condensed consolidated financial statements.
Credit Facilities
The Company is party to a Credit Agreement by and among the Company, as
borrower, certain subsidiaries of the Company from time to time party thereto as
guarantors, the lenders from time to time party thereto (the "Lenders"),
Bank
Syndication Agent,
as Co-Documentation Agents, and
Corp.
time, the "Credit Agreement").
The Credit Agreement, as amended, provides for (1) a five-year senior secured
term loan facility in an aggregate principal amount of
Loan Facility") and (2) a five-year senior secured revolving credit facility in
an aggregate principal amount of
issuance of letters of credit equal to the unused amount of the revolving credit
facility and a sublimit for swingline loans equal to the lesser of
and the unused amount of the revolving credit facility) (the "Revolving Credit
Facility" and together with the Term Loan Facility, the "Credit Facilities").
Term Loan Facility. The principal amount of the Term Loan Facility amortizes in
quarterly installments, which began with the close of the fiscal quarter ending
quarterly, decreasing to
the quarter ending
maturity. The Term Loan Facility matures on
there was
Facility.
Revolving Credit Facility. The Revolving Credit Facility allows for borrowings
of up to
credit equal to the unused amount of the Revolving Credit Facility and a
sublimit for swingline loans equal to the lesser of
amount of the Revolving Credit Facility. As of
drawn
credit of
At our option, borrowings under the Credit Facilities bear interest at rates
equal to either (1) a rate determined by reference to SOFR, plus an applicable
margin (described below) and a credit adjustment spread equal to 0.10% or (2) a
base rate determined by reference to the highest of (a) the "prime rate" of
SOFR in effect on such day for an interest period of one month plus 1.00%, plus
an applicable margin (described below).
The applicable margin for loans under the Credit Facilities varies from 2.75%
per annum to 3.25% per annum (for SOFR loans) and 1.75% to 2.25% per annum (for
base rate loans) based on our consolidated leverage ratio ranging from 1.25-to-1
to greater than 2.25-to-1. Interest payments with respect to the Credit
Facilities are required either on a quarterly basis (for base rate loans) or at
the end of each interest period (for SOFR loans) or, if the duration of the
applicable interest period exceeds three months, then every three months. As of
Facility are accruing interest at a rate of 7.884% and 7.661% per annum,
respectively.
In addition to paying interest on outstanding borrowings under the Revolving
Credit Facility, we are required to pay a quarterly commitment fee based on the
unused portion of the Revolving Credit Facility, which is determined by our
consolidated leverage ratio.
We may prepay the loans under the Credit Facilities, in whole or in part, at any
time without premium or penalty, subject to certain conditions including minimum
amounts and reimbursement of certain costs in the case of prepayments of SOFR
loans. In addition, we are required to prepay the loan under the Term Loan
Facility with the proceeds from certain financing transactions, involuntary
dispositions or asset sales (subject, in the case of asset sales, to
reinvestment rights).
All obligations under the Credit Facilities are or will be guaranteed by each
existing and future direct and indirect wholly owned domestic subsidiary of the
Company, other than all of the Company's current and future regulated insurance
subsidiaries (collectively, the "Guarantors").
The Company and the Guarantors are party to a Pledge and Security Agreement, (as
amended from time to time the "Security Agreement"), in favor of
as collateral agent. Pursuant to the Security Agreement, amounts borrowed under
the Credit Facilities are secured on a first priority basis by a perfected
security interest in substantially all of the present and future assets of the
Company and each Guarantor (subject to certain exceptions), including all of the
capital stock of the Company's domestic subsidiaries, other than its regulated
insurance subsidiaries.
The Credit Agreement contains, among other things, covenants, representations
and warranties and events of default customary for facilities of this type. The
Company is required to maintain, as of each fiscal quarter (1) a maximum
consolidated leverage ratio of
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2.50 to 1.00, stepping down to 2.25 to 1.00 as of the second quarter of 2024 and
2.00 to 1.00 as of the second quarter of 2025, (2) a minimum consolidated fixed
charge coverage ratio of 1.20 to 1.00 and (3) a minimum consolidated net worth
for the Company and its subsidiaries, which is required to be not less than
million
and regulated subsidiaries) plus the net cash proceeds of any equity
transactions. Events of default include, among other events, (i) nonpayment of
principal, interest, fees or other amounts; (ii) failure to perform or observe
certain covenants set forth in the Credit Agreement; (iii) breach of any
representation or warranty; (iv) cross-default to other indebtedness; (v)
bankruptcy and insolvency defaults; (vi) monetary judgment defaults and material
nonmonetary judgment defaults; (vii) customary ERISA defaults; (viii) a change
of control of the Company; and (ix) failure to maintain specified catastrophe
retentions in each of the Company's regulated insurance subsidiaries.
Convertible Notes
On
entered into a purchase agreement (the "Purchase Agreement") with
Global Markets Inc.
pursuant to which the Company agreed to issue and sell, and the Initial
Purchaser agreed to purchase,
Company's 5.875% Convertible Senior Notes due 2037 (the "Convertible Notes") in
a private placement transaction pursuant to Rule 144A under the Securities Act,
as amended (the "Securities Act"). The Purchase Agreement contained customary
representations, warranties and agreements of the Company and the Notes
Guarantor and customary conditions to closing, indemnification rights and
obligations of the parties and termination provisions. The net proceeds from the
offering of the Convertible Notes, after deducting discounts and commissions and
estimated offering expenses payable by the Company, were approximately
million
The Company issued the Convertible Notes under an Indenture (the "Convertible
Note Indenture"), dated
the Notes Guarantor, as guarantor, and
as trustee (the "Trustee").
The Convertible Notes bear interest at a rate of 5.875% per year. Interest is
payable semi-annually in arrears, on
Convertible Notes are senior unsecured obligations of the Company that rank
senior in right of payment to the Company's future indebtedness that is
expressly subordinated in right of payment to the Convertible Notes; equal in
right of payment to the Company's unsecured indebtedness that is not so
subordinated; effectively junior to any of the Company's secured indebtedness to
the extent of the value of the assets securing such indebtedness; and
structurally junior to all indebtedness or other liabilities incurred by the
Company's subsidiaries other than the Notes Guarantor, which fully and
unconditionally guarantee the Convertible Notes on a senior unsecured basis.
The Convertible Notes mature on
redeemed or converted.
Holders may convert their Convertible Notes at any time prior to the close of
business on the business day immediately preceding
during the period from, and including,
on the second business day immediately preceding
following circumstances: (1) during any calendar quarter commencing after the
calendar quarter ending on
Company's common stock, for at least 20 trading days (whether or not
consecutive) in the period of 30 consecutive trading days ending on the last
trading day of the calendar quarter immediately preceding the calendar quarter
in which the conversion occurs, is more than 130% of the conversion price of the
Convertible Notes in effect on each applicable trading day; (2) during the ten
consecutive business-day period following any five consecutive trading-day
period in which the trading price for the Convertible Notes for each such
trading day was less than 98% of the closing sale price of the Company's common
stock on such date multiplied by the then-current conversion rate; (3) if the
Company calls any or all of the Convertible Notes for redemption, at any time
prior to the close of business on the second business day immediately preceding
the redemption date; or (4) upon the occurrence of specified corporate events.
During the period from and including
on the second business day immediately preceding
immediately preceding
Notes for conversion at any time, regardless of the foregoing circumstances.
The conversion rate for the Convertible Notes was initially 67.0264 shares of
common stock per
initial conversion price of approximately
conversion rate is subject to adjustment in certain circumstances and is subject
to increase for holders that elect to convert their Convertible Notes in
connection with certain corporate transactions (but not, at the Company's
election, a public acquirer change of control (as defined in the Convertible
Note Indenture)) that occur prior to
Upon the occurrence of a fundamental change (as defined in the Convertible Note
Indenture) (but not, at the Company's election, a public acquirer change of
control (as defined in the Convertible Note Indenture), holders of the
Convertible Notes may require the Company to repurchase for cash all or a
portion of their Convertible Notes at a fundamental change repurchase price
equal
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to 100% of the principal amount of the Convertible Notes to be repurchased, plus
accrued and unpaid interest to, but excluding, the fundamental change repurchase
date.
At any time prior to
any portion of the Convertible Notes, at the Company's option, at a redemption
price equal to 100% of the principal amount of the Convertible Notes to be
redeemed, plus accrued and unpaid interest to, but excluding, the redemption
date. No sinking fund is provided for the Convertible Notes, which means that
the Company is not required to redeem or retire the Convertible Notes
periodically. Holders of the Convertible Notes are able to cause the Company to
repurchase their Convertible Notes for cash on any of
2027
accrued and unpaid interest to, but excluding, the relevant repurchase date.
The Convertible Note Indenture contains customary terms and covenants and events
of default. If an Event of Default (as defined in the Convertible Note
Indenture) occurs and is continuing, the Trustee by notice to the Company, or
the holders of at least 25% in aggregate principal amount of the Convertible
Notes then outstanding by notice to the Company and the Trustee, may declare
100% of the principal of, and accrued and unpaid interest, if any, on, all the
Convertible Notes to be immediately due and payable. In the case of certain
events of bankruptcy, insolvency or reorganization (as set forth in the
Convertible Note Indenture) with respect to the Company, 100% of the principal
of, and accrued and unpaid interest, if any, on, the Convertible Notes
automatically become immediately due and payable.
In
outstanding Convertible Notes. As of
principal amount of outstanding Convertible Notes, net of
Convertible Notes held by an insurance company subsidiary.
As discussed above, holders of the Convertible Notes issued by the Company had
an optional put right, pursuant to the indenture governing the Convertible
Notes, to require the Company to repurchase the aggregate principal amount of
Convertible Notes that are validly tendered. The Company received notice from
the Depository for the Convertible Notes that, on
aggregate principal amount of the Convertible Notes has been validly tendered in
accordance with the terms of the indenture and the Company's notice with respect
to the optional put right of the Convertible Notes, and the Company has
requested that the Trustee cancel the Convertible Notes tendered. The
outstanding balance as of
On
Convertible Notes tendered and unpaid interest in the aggregate amounts of
million
Revolving Credit Facility to replenish the cash used to pay the
for the purchase of the tendered Convertible Notes.
FHLB Loan Agreements
In
fixed maturity securities with an estimated fair value of
collateral and received
with the FHLB Atlanta. The loan originated on
fixed interest rate of 3.094% with interest payments due quarterly commencing in
13, 2023
the FHLB. Membership in the FHLB required an investment in FHLB's common stock
which was purchased on
31, 2023
permitted to withdraw any portion of the pledged collateral over the minimum
collateral requirement at any time, other than in the event of a default by the
subsidiary. The proceeds from the loan were used to prepay the Company's Senior
Secured Notes due 2023 in 2018.
Critical Accounting Policies and Estimates
When we prepare our condensed consolidated financial statements and accompanying
notes in conformity with
we must make estimates and assumptions about future events that affect the
amounts we report. Certain of these estimates result from judgments that can be
subjective and complex. As a result of that subjectivity and complexity, and
because we continuously evaluate these estimates and assumptions based on a
variety of factors, actual results could materially differ from our estimates
and assumptions if changes in one or more factors require us to make accounting
adjustments. We have made no material changes or additions with regard to those
policies and estimates as disclosed in our Annual Report on Form 10-K for the
year ended
Recent Accounting Pronouncements
The information set forth under Note 1 to the condensed consolidated financial
statements under the caption "Basis of Presentation and Significant Accounting
Policies" is incorporated herein by reference. We do not expect any recently
issued accounting pronouncements to have a material effect on our condensed
consolidated financial statements.
30
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ONEWATER MARINE INC. – 10-Q – Management's Discussion and Analysis of Financial Condition and Results of Operations
NI HOLDINGS, INC. – 10-Q – Management's Discussion and Analysis of Financial Condition and Results of Operations
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